What Happened?
Renting Partnerships in Cincinnati provides residents not in a position to buy a home with a way to overcome skyrocketing rent prices. The strategy works to keep rents affordable while encouraging positive participation in community development.
Goal
Many different populations are unable to own a home, and are therefore susceptible to rising rent prices in major cities. Renting Partnerships was founded two years ago to help residents who rent properties become more financially secure by exchanging credits for positive behavior and investment in the property.
How It Works
Renting Partnerships works with the Peaslee Neighborhood Center to offer an equity exchange program to people who cannot build out the investment of a home. Renters who live in affordable housing units in Cincinnati are offered an equity lease agreement that calls for a number of commitments to be met including:
- Paying rent on time
- Completing work assignments on the property
- Following house rules
- Participating in resident meetings
When renters fulfill these requirements they earn financial credits. Because the renters are more invested in the buildings where they live, turnover rates are lower and landlord maintenance costs are cut. The savings landlords enjoy generated from high occupancy rates are then invested in a financial fund.
Once a renter has fulfilled his or her commitments for five years, the financial credits earned can be exchanged for cash. Renters can continue to earn credits or move to another location. Each renter is able to earn up to $10,000 in financial credits over 10 years. This access to capital allows renters to work toward greater financial security.
According to The New York Times and Zillow, 90 major cities report a median rent that is higher than 30 percent of the median gross income – which is the recommended threshold for affordable rent. Therefore, the city of Cincinnati will benefit from the arrangement as it will work to control rising rents that are out-pricing many middle class families from key parts of the city.
The Rental Situation
A recent study from Harvard revealed half of all renters across the country spend more than thirty percent of their income on housing, compared to just 38 percent of renters in 2000. The researchers found the fundamental problem with affordability in housing comes from the fact that providing decent accommodations typically costs more than what low-income renters can pay. A very small proportion of new housing developments offer units that cost 30 percent of low-income salaries, creating an ever-growing gap between the number of low-income renters and the supply of affordable housing units.
The study found 11.8 million renters with extremely low incomes competed for 6.9 million affordable housing units in 2011, creating a 4.9 million unit shortfall. Initiatives such as Renting Partnerships are helping communities support low-income renters by increasing their housing options.
Another study from the Center for American Progress listed a number of strategies to help renters save money while renting such as:
- The Department of Housing and Urban Development’s Family Self-Sufficiency program
- Renter Equity Agreements – Nonprofit
- Renter Equity Agreements – For Profit
Just as Renting Partnerships offered equity agreements through a nonprofit organization, some private real estate companies are creating similar arrangements that enable landlords to collect a profit from participating in the program.
The New Affordable Housing
Gov1 has kept an eye on the latest affordable housing strategies and tactics used to connect housing and transit.